With the global impact of the coronavirus pandemic, it initially appears to be more difficult for startups to gain access to funding. However, this isn’t actually the case.
Statistics from startups.co.uk show a 60% increase in the number of businesses launching online, and new ventures are popping up in the fields of healthcare, food delivery services, and more.
Across Europe, several startups have been inspired by the struggles caused by the pandemic and have responded by presenting solutions to these issues. For instance, NYE Health was launched by NHS GP Dr. Alexander Finlayson to provide immediate care to patients. They developed a free mobile and video consultation school to aid hospitals and general practitioners during the pandemic. Also in the Nordics we are seeing startups like Liva Health Care respond to the increasing demand for digital health solutions. The startup has offered their health program for free for all public institutions during the crisis.
In addition, Forlocal was recently launched to support the local communities during the crisis. Their website, launched by CEO Chris Giddins, sells vouchers that can be used for local businesses when they reopen.
But still it seems that the access startups have to funding is limited due the uncertainty of the investors. So what are your possibilities? Where do you start? Read along to explore the best startup funding opportunities available during a crisis.
Typically, public funding is an excellent option for startups and SMEs. It is risk-free capital. This means that companies will not have to give up ownership shares in exchange for the funding. To add to this, Techfunding.eu describes how the funding process is swift, meaning that companies can quickly launch their products or service on the market.
Finding the right funding program and having a concrete plan in place can help you get the funding your company needs during the competitive marketplace. To get you started, Techfunding offers an initial project assessment to give you an overview of your public funding opportunities.
The consultation is free of charge for the first 30 minutes. It’s important to note that public funding is typically targeted towards phases of research, development, and demonstration. This means that activities such as marketing and production are not supported. Ensuring that your project matches the scope of the funding scheme you’re applying for is crucial.
Bootstrapping, Angel Investors and Crowdfunding
Other options for funding include “bootstrapping” or launching your own startup without any outside help. This coin has two sides as well. While you keep full control of your company, you also don’t benefit from the wisdom a potential investor could provide. If you don’t have the capital for this method given the current circumstances, Sifted notes that while angel investors might require shares of your company, their rates are typically more competitive compared to those offered by banks.
Crowdfunding websites are also another option to help fund your idea during this time. It involves a large number of individual investors. The so-called crowd of funders. The key here is to come up with a compelling pitch that attracts the attention of that crowd. You can also offer reward incentives to help your startup reach its goal. This is a particularly interesting option given the rise in online activity during the pandemic.
In the Nordics, MATE.BIKE recently completed its latest round of funding for equity through a crowdfunding campaign that raised almost 2,6 million euros on SEEDRS.
Choosing the best platform depends on whether you’re a digital creative, looking for equity crowdfunding, or are a non-profit. The two biggest names in the industry are Kickstarter and Indigogo. For Kickstarter, you don’t receive your funds unless you complete your campaign.
On the other hand, Indiegogo’s flexible funding option lets you receive your funds whether or not you meet your goals.
Setting up an account is a relatively quick and simple process. Do note that many of these platforms charge processing fees from each contributing transaction and a small percentage of your total earnings.
Startups should keep in mind the limitations and specific circumstances that the coronavirus pandemic has caused. An article on EU Startups suggests considering bridge rounds which can help solidify your short-term position until a higher valuation is made.
The first step for Dream It’s framework for guiding your bridge fund strategy includes clearly articulating why you’re raising bridge funding. You should avoid being negative signaling in your pitch. Whether it’s changing market conditions, needing more cash, or having low traction.
You need to convince them that your idea is worth investing in. Set the right amount of capital to justify the risk. You follow that up by showing the investors that you are headed in the right direction. You can use various metrics such as sales velocity, revenue, LTV (loan-to-value) to CAC (customer-acquisition-cost) ratio, and trials completed to do so. All of them are metrics you need to be aware of and setup plans for to help convince the investors.
A Sustainable Transition Opportunity
The good news is that various European countries are providing stimulus packages to help support startups during this time.
In Denmark for instance, the Danish Business Promotion Board is releasing 82.5 million kroner ($12.5 million) to help small and medium-sized businesses practice environmental sustainability during the transition. Check out their page for open application rounds and assistance on seeking funding. They provide information that guides you through the process of application to completion, as well as the requirements you need.
Optimizing Transaction Costs
Another factor that startups need to consider is the additional costs that they can potentially incur during this time. In the finance world, Reuters reports how a new breed of startup is seeking to compete with banks by transacting with smaller customer-facing foreign exchange businesses, which are more popularly frequented by asset managers and insurance companies.
Is your company interested in growing its seed funding? Making smart investment decisions can help your business stay in the green. Thankfully, there are many ways to get started with investing, even if you’re a complete novice.
FXCM explains that opening a Forex account is often done simply by filling out an online form on your trading platform of choice. These online platforms often charge minimal commissions and add-on fees. You can therefore reduce your business costs by bypassing banks. This is highly relevant for startups with offices in various locations around the world. Holding various currencies can speed up key transactions and generate greater flexibility.
However, for higher-risk prospects, securing the funding you need this time might be a lengthy struggle. As the crisis continues to unfold, keeping an eye on the changes in the startup community can help guide you in making your future decisions.